Silicon Valley: The anatomy of a cutting-edge start-up

The Andregg brothers might have the cure for all our illnesses in their grasp. But how do a pair of penniless science nerds raise the millions needed to unlock the very fabric of our DNA? Dream big - and get lucky...

Mike Hodgkinson
Sunday 14 August 2011 00:00 BST

Even by Silicon Valley standards, the grand design drawn up by William and Michael Andregg is hugely ambitious. Halcyon Molecular, the company that the brothers founded in 2008, is developing a way to sequence the human genome – and thus unlock the deepest secrets of DNA – faster and cheaper than ever before, and they have embarked on their adventure with financial muscle from billionaire members of a venture-capitalist fraternity known as the PayPal Mafia. That, on the face of it, sounds commendable enough, but there's a two-part qualification to their basic plan which places the enterprise outside of the ordinary and teases the limits of the imagination.

First, there is the relative inexperience of the Andregg brothers. William is 29, Michael just a year older, and both are college drop-outs — but given Silicon Valley's impressive track record for nurturing and funding obsessive, unconventional young innovators, their age is hardly unusual. The surprise is the long-term mission of Halcyon Molecular: to solve "the biggest challenge humans can individually face – disease and mortality", as the mission-statement poster in their office reception says. Put another way, they're supercharging the effort to map life's biological code in almost unimaginable digital detail and, by doing so, ultimately, to attempt to conquer death itself.

Every element of the Halcyon Molecular story feeds into the essence of Silicon Valley: crazy money; DIY science; social networking; nano-scale chemistry; hyper-extended human lifespans; space travel. As intoxicating as the ideas that spiral from Halcyon Molecular are, they also reveal how new technologies are hatched and funded, and how extraordinary visions connect to big money in a cutting-edge West Coast start-up.

"Where we grew up, you can clearly see the structure of the Milky Way," says William, leaning back on his office chair, chewing on a slice of pizza and remembering his childhood in Arizona. "It was 90 miles to the nearest city of any size. Pretty high altitude." The closest small town to the brothers, who were raised by their single-parent mother, was Bisbee, a former frontier mining camp once loaded with copper. In the mid-1970s, hippies and artists moved in as the miners moved out. Down the road is Tombstone, site of the Gunfight at the OK Corral.

It was by looking up at the stars and indulging fantasies of space travel that the young Andreggs realised that it would require a greatly extended lifespan to actually explore the heavens. The science fiction of Vernor Vinge, Fred Saberhagen and Carl Sagan – especially the movie version of Sagan's book, 1997's Contact – sustained them in the meantime, but it wasn't until 2001 that a realisation struck William. It happened in a Barnes & Noble book shop in Tucson, near the travel section. "I was looking at the books I wanted to read, thinking about the list of things I wanted to do in life," says William, who speaks in rapid-fire sentences. "I was thinking: 'There's no way I'm going to get all those things done in a normal human lifespan. I've got to figure out a way to keep doing things.' In order to do that, I needed to first solve the problems in biology: DNA sequencing is the great problem of our time."

There was another problem: William didn't know much about biology. But his brother did. "I had a molecular biology background," says Michael, Halcyon Molecular's chief technology officer. "William came at it from a physics point of view. That was the start of it. Six months on, he'd read a bunch of medical textbooks and a little biology, but it still seemed like we didn't understand enough of the fundamentals of biology. We needed to step back a little bit."

Michael continues: "As kids, we'd always thought that large complex diseases would be cured someday by scientists working valiantly in labs somewhere. We really wanted those interesting things to happen in the future, and we realised we should do it ourselves. We found statistics that 100,000 people died every day of these major complex diseases: cancer, heart disease and stroke. It seemed like a really worthwhile goal so I joined William to work on it, a few months after he originally came up with the idea."

William, conditioned to a working environment filled with whiteboards and felt pens, describes that idea while scribbling on his desk. He explains that Sanger sequencing, the comparatively crude method used by pioneer J Craig Venter to map the human genome in 2000, chopped up DNA into relatively short pieces, but the Halcyon Molecular approach works with longer "read lengths". "It's sort of like assembling a puzzle," he says. "The Sanger sequencing had roughly 10 to 20 million pieces, versus [our] thousands of pieces. When you have 10 or 20 million pieces, a lot of them look identical. It's almost impossible to assemble." To analyse the larger pieces – Halcyon's long read lengths – he realised they just had to look at them, through an electron microscope.

Armed with this simple idea – that to see the big picture, faster, you make a puzzle with bigger pieces – the Andreggs set about their quest full time. They used their student-loan money to rent a modest 3ft-wide workspace on a laboratory bench at the University of Arizona, and occupied it outside normal working hours. "As long as you're willing to be up at night you can use all the equipment you want," explains Michael. "It was as though we had our own personal lab of electron microscopes."

Round about the time that the Andregg brothers were developing their breakthrough genome-sequencing theory on the cheap, the second half of the Halcyon Molecular equation started to take shape, 700 miles away in Silicon Valley. In 2002, money-transfer business PayPal was sold to eBay for $1.5bn, making very rich men of its five co-founders. Two of those entrepreneurs, Peter Thiel and Luke Nosek, would become managing partners at Founders Fund, the venture-capital company that wrote Halcyon Molecular's first sizable seed-round cheque, for $500,000, in 2008.

Thiel, a staunch libertarian, was one of the early-stage Facebook backers, and as such was briefly fictionalised in the movie version of that modern-day tech-investment saga, The Social Network. The 44-year-old's appetite for investing in long-term, futuristic technologies is prodigious: his areas of interest and speculation include autonomous ocean cities (via the Seasteading Institute), artificial intelligence (the Singularity Institute), and space exploration (SpaceX). Thiel tends to frame his investments in the gilt-edged language of a higher purpose – namely to "take our civilisation to the next level" – and depending on your perspective, that makes him either a fantasist or visionary. His track record as an entrepreneur, though, speaks for itself.

Polish-born Nosek, 36, worked on supercomputers at the University of Illinois in the early 1990s, then entered Silicon Valley working for the computer-services company Netscape, before co-founding PayPal. He cites as a key personal influence the novel Atlas Shrugged by Ayn Rand, whose ideas picked up considerable traction among Silicon Valley entrepreneurs during the 1990s. "I'm not a libertarian or an objectivist [like Rand]," says Nosek, whose personal collection of elaborately spun theories and stories is – like his bank account – seemingly inexhaustible. "But the most important lesson I got from Rand was that business can be good or evil. I have realised more and more that great companies, founded for a long-term purpose, such as Google or Facebook or SpaceX, may do more good in the world than any other vehicle that we have." Nosek became the link-man between Founders Fund and Halcyon Molecular: he is the man who discovered the Andreggs.

Here, we rewind a few years. While Nosek was working out how to spend his PayPal haul, the brothers had quietly abandoned university in Tucson, and spent the mid-Noughties stretching out $200,000 in loan money from friends and family, honing their ideas, convinced they would produce something "incredibly valuable to humanity". Then, in March 2008, came the trip to Silicon Valley that changed everything – even though precisely nothing went to plan: their first meeting with Nosek happened by accident.

"We'd borrowed money to get flights," says Michael, recalling how the intention had been to hook up with a contact at the Lawrence Berkeley National Laboratory – a lab run by the US Department of Energy Office of Science – to make components crucial to their research. When that contact flaked on them and rescheduled, the brothers dealt with their disappointment by re-routing to the inaugural "BIL" gathering 90 miles away in Monterey, only because a friend happened to be driving there. BIL is a self-styled "un-conference" where left-field brainiacs, techno-types and alternative thinkers get together in the shadow of the better-known ideas forum, TED (Technology, Entertainment, Design; the acronym BIL doesn't actually stand for anything – it's just a tongue-in-cheek nod to the movie Bill & Ted's Excellent Adventure).

Nosek had wanted to attend TED, but when his web browser crashed, leaving him unable to submit his application form in time, he went to BIL instead. A couple of handshakes and networked introductions was all it took for him to meet the Andreggs. "I didn't find out who Lukek was until 20 minutes into the conversation," says Michael. "I thought he was a grad student, because he was so young and he was wearing a T-shirt. I assumed all founders of billion-dollar companies would be wearing suits but it's a totally different culture in California. We showed him some pictures, some of our recent data. Then it was, like, 'Woah, holy crap!' – he got really excited."

The way Nosek tells it, he was drawn to the Andreggs because they combined revolutionary science and a solid business structure with an overarching ideal – a holy grail. "We had a mission at PayPal – which was to create a new financial system, a new world currency, and we failed," he says. "We were a financial success, but we didn't succeed at the purpose of our company. As I became a venture capitalist, it's almost like I went to the dark side for a while. The reason the Andregg brothers started their company was for their mission – which is that human beings ought to be free of disease, and we should be able to be healthy for as long as we want."

Put simply, complete genome sequencing offers the prospect of unparalleled insight into the causes of disease. "We don't understand the vast majority of what specifically the [genetic] code does in a human context," says William. "But we do know that there's no disease without some kind of genomic component. And if you can get trustworthy genomic data, and enough of it, in both the clinic and the lab, you can start to hack your way to an understanding of exactly what's happening."

Behind the promise of fast and cheap sequencing, there's also the tantalising prospect of a big payoff. "They actually want to do this by building a billion-dollar business," says Nosek. "I followed the brothers to the lab, and I saw that not only were they able to work with the academic system, to find great people and to get the resources, they also had a very common-sense business plan. So I thought I could work with them."

With Nosek in their corner, things started to move quickly for the Andreggs. Living out of hotel rooms, in April 2008 they built a "threader" – a unique device to stretch and position single strands of DNA on a surface. The threader was conceived back in Tucson, where Michael had found himself in a swimming pool, imagining his body as a molecule, "floating on the surface of the water, wondering how to get pulled out". After a spell in a rented suburban house that proved too small for their growing roster of staff and equipment, they did what any self-respecting young tech-pioneers with access to a hefty bankroll would do: they rented a mansion, in the sought-after Los Altos Hills neighbourhood near Silicon Valley, and turned it into a research facility.

The staff kitchen became the molecular-biology room, and the four-car garage housed a borrowed million-dollar electron microscope, the cooling system for which was redirected to heat the king-sized swimming pool. They put a tent in the living-room for extra sleeping space, and in the dining-room, with its glittering crystal chandelier, they held their brainstorming sessions.

The energy and sense of purpose generated by the Andregg brothers enabled them to engage some of the world's leading scientific talents, including the electron microscopy expert, Professor Andrew Bleloch, 49, former head of the SuperStem laboratory in Daresbury, Cheshire. "The long-term view, the attempt to help with general medicine, life-extension... I've only been exposed to those ideas fairly recently, and I'm an enthusiastic convert," says Bleloch. "What sold it to me was the problem the brothers were trying to solve, the intellectually honest discussion, and the integrity with which they were trying to solve it."

After nine months, and with $5.3m of funding in the bank, they secured a more suitable Silicon Valley workspace in May 2010: a massive 50,000sq ft office/laboratory in Redwood City near the San Francisco Bay waterfront, with a staff of around 50, a growing bank of state-of-the-art equipment... and a foosball table. In August 2010, an additional $20.5m in funding swelled the Halcyon Molecular coffers, courtesy of Elon Musk, co-founder of SpaceX and Tesla Motors (the electric sports-car company), and another member of the influential PayPal Mafia.

A significant obstacle facing the Andreggs is the scale of their scientific problem: "Even if we had hundreds of billions of dollars in resources and hired tens of thousands of people, it's still extremely challenging," says William. "There's still no guarantee of success. We're going to need to continue on this journey for decades."

While the Andreggs are reluctant to discuss precise timelines, they expect that within "several years" a complete human genome will be sequenced cheaply (around $100 per genome, rather than the current approximate $10,000 price tag). It's brave talk, particularly as Silicon Valley is beginning to worry that it's in the midst of another bubble, inflated by the success of such companies as Facebook, Groupon and Twitter. In contrast to those social networks, however, Halcyon Molecular's focus is long-term, on biology and the health sciences. What's more, says Steve Blank, a Silicon Valley analyst, "Bubbles in the technology industry actually leave value when they're done. Financial bubbles just leave new yachts in the Mediterranean and new houses in the South of France... for somebody. But technology bubbles actually leave innovation and things that are great for us."

In the recent BBC documentary All Watched Over by Machines of Loving Grace, Adam Curtis laid out a broad and critical view of Silicon Valley, outlining a system open to abuse and favourable to the financial elite. And indeed, if Halcyon Molecular is successful, won't that mean a large chunk of control over humanity's wellbeing will be entrusted to a small group of West Coast tech billionaires?

Nosek is defiant when asked to defend his crusading, deep-pocketed idealism. "Why wouldn't you want people to be successful, to care about making a better future for everybody?" he insists. "What we believe at Founders Fund is that technology is a way to help everybody on the planet."

From this perspective, Halcyon Molecular represents a new take on the familiar notion of a Californian technological utopia – something bright and optimistic to believe in, for the good of humankind; the perfect alliance of young scientific talent and investment muscle, rather than just another spin on the venture-capital money-go-round. The Andregg brothers' company represents the exploration of a technology that could change what it means to be human, fuelled by idealism, and potentially worth multiples of billions of dollars. By partnering with Founders Fund, they connected with backers whose futuristic ideology clicked with their own, and by relocating from Arizona to Silicon Valley, they were able to immerse themselves in, and impress, a business culture built on wild, hugely ambitious ideas.

"Where else," says Blank, with a chuckle, "would you write cheques for millions of dollars to twenty-somethings and not hold their relatives for hostage?"

Follow the money: The venture-capital companies that turn ideas into actions

1. Founders Fund

Key players: Peter Thiel, Luke Nosek, Sean Parker

Overseen by Peter Thiel, who is practically a venture-capital brand-name in his own right, Founders Fund's core of managing partners includes Sean Parker – the Napster co-founder played in The Social Network by Justin Timberlake. Its website features an extended essay/ manifesto titled "What Happened to the Future?" in which the current state of investment in technology is dissected, and a new vision is outlined "to radically change the world for the better".

Notable investments: SpaceX (space transportation); Palantir Technologies (data analysis)

2. Andreessen Horowitz

The players: Marc Andreessen, Ben Horowitz

These relative newcomers (founded 2009 with an initial $300m) have become leaders in late-stage investing for software, web and mobile. They cut their teeth as entrepreneurs – Andreessen co-founded Netscape, and teamed up with Horowitz on Opsware (software), which sold to Hewlett-Packard for $1.6bn – and they played a major role in a buyout consortium manoeuvre that led to Skype being acquired by Microsoft in May 2011 for $8.5bn.

Notable investments: Zynga (social-network games); Groupon (e-commerce)

3. Floodgate

The players: Mike Maples Jr, Ann Miura-Ko

The relatively small scale of Floodgate's investments, which typically fall into the $150,000 to $1m range, are an example of the new class of "Super Angel" investor. Prime mover Maples was relatively wet behind the ears in venture-capital terms when he arrived in Silicon Valley from Texas in the mid-Noughties, but an early punt on Twitter got him moving in the right direction and he followed that success with sharp moves on ngmoco (video games) and Chegg (textbook rental).

Notable investments: Kno (education software); Solarwinds (network management)

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